Magellan Financial Group’s shares have suffered such a brutal fall that it was due for a bounce, despite brokers expressing nothing but antipathy for the fallen investment shop.
The fund manager’s shares were up as much as 6 per cent to $17.41 despite UBS analyst Shreyas Patel putting a ‘sell’ rating and a $17 target price on the stock. The shares have slumped 65 per cent over the last 12 months, from $50 to close at $17.61 yesterday.
Magellan Financial Group co-founder Hamish Douglass has stepped back from his role at the company.Credit: Luis Enrique Ascui
Meanwhile, Jarden’s Elizabeth Miliatis retained an underweight rating and lowered the firm’s price target to $18.60 saying the sudden changes will drive additional retail outflows despite the stock trading at just 9 times forward earnings.
“Further, we expect institutional clients will more deeply question their commitment to the firm, given significant key man risk, consistent underperformance of the flagship strategy and higher fees,” she said.
According to Ms Miliatis, Magellan’s top five institutional clients contribute 23 per cent of funds under management (FUM). Elsewhere, Morningstar is reviewing Magellan and its satellite funds, but was not as negative about the tumult.
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“Key man risk has been an ongoing issue for the global equities strategies, although we note there is considerable depth of talent at Magellan that hasn’t been as visible to the public eye.”
At least Magellan’s board can breathe a sigh of relief that its investment in Barrenjoey was not blighted by the share price spiral. Payment for Magellan’s 40 per cent ownership stake of Barrenjoey included 1.2 million shares worth $66 million when this stock was handed to the investment banking startup in September 2020.
Barrenjoey sold the stock for just under $52 each, providing it with $62.4 million cash which provided a significant chunk of its working capital as the firm burnt through cash in its first year of operations. A sale of this stock on Monday could have yielded as little as $19.4 million.
